<p class=“MsoNormal“>Last week the <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-non-farm-payrolls-223k-vs-200k-expected-20230106/“ target=“_blank“ rel=“follow“>NFP
report</a> showed once again that the labour market is tight and resilient, impacting the S&P500.
What caught the market’s attention though was the data on Average Hourly
Earning (i.e. wages). </p><p class=“MsoNormal“>They missed expectations and the
prior numbers were revised downwards. The market interpreted that as a
goldilocks scenario: strong labour market without wage inflation. </p><p class=“MsoNormal“>What followed was totally
unexpected. The <a target=“_blank“ href=“https://www.forexlive.com/news/ism-december-us-services-496-vs-550-expected-20230106/“ target=“_blank“ rel=“follow“>ISM
Services PMI</a> dived into contractionary territory for the first
time since 2 and a half years. This is a leading indicator for the Services
sector, which is about 80% of the US economy. The market rallied even more on
hopes that the Fed would stop rate hikes very soon and start cutting rates
earlier. </p><p class=“MsoNormal“>The market may be underestimating
the Fed’s resolve in keeping conditions tight for longer. </p><p class=“MsoNormal“>In fact, Fed speakers doubled
down on their intention of keeping rates higher for longer after the reports as
their focus is more on the labour market now and they want to see unemployment picking
up before having the confidence in easing monetary conditions. </p><p class=“MsoNormal“>If that doesn’t happen (which is
unlikely), they will probably keep at it until they see the CPI/PCE Y/Y near
their 2% target. In that case though, it would be too late.</p><p class=“MsoNormal“>S&P500 Technical Analysis</p><p class=“MsoCaption“>Daily chart of the S&P500.</p><p class=“MsoNormal“>On the daily chart above, we can
that the price came back to the old <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> in the 3920-3940 area that now
acts as <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a>. If the price manages to break
that zone, buyers will be in control and target the blue <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a> or even a breakout higher. </p><p class=“MsoNormal“>If the price gets rejected from
that zone, sellers will regain control and target at least the support at 3800
if not even lower to the October low at 3506.</p><p class=“MsoNormal“>Zooming in to the 1-hour chart,
we can see the rangebound market of the past few weeks. The <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> is in the 3790-3810 area and the
<a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>resistance</a> is in the 3920-3940 area. We can also see more clearly
the two possible scenarios: </p><p class=“MsoListParagraphCxSpFirst“>·
Break above and run to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“>trendline</a> in the 4000 price zone.</p><p class=“MsoListParagraphCxSpLast“>·
Fail and fall back to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> in the 3800 price zone. </p><p class=“MsoCaption“>On the 5-minutes chart, we can see that the buying
momentum out of the two economic reports is waning as depicted by the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>divergence</a>
with the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a>.
This may give a higher probability for the 2nd scenario to play out
as the price may not have enough strength to break up.</p>

This article was written by ForexLive at www.forexlive.com.

<p style=““ class=“text-align-justify“>The dollar was weaker across the board coming into European trading but higher bond yields helped to underpin USD/JPY to push higher at the start of the session, with the pair moving up from 131.65 to a high of 132.65 before easing slightly in the past 15 minutes or so. In the bigger picture, the pair is coming off a push lower on Friday after testing the late December highs near 134.50 – after having bounced off 130.00 last week:</p><p style=““ class=“text-align-justify“>In a sense, one can argue that price action is consolidating in between the levels highlighted as buyers and sellers continue to do battle. On a day when the dollar seems to be running lower across the board, USD/JPY is bucking the trend so that tells us that the playbook isn’t so straightforward.</p><p style=““ class=“text-align-justify“>The bond market remains a key driver as well and 10-year Treasury yields are up 2.6 bps to 3.597% on the day. Be mindful that Japanese markets are closed today and will resume trading tomorrow with a keen focus on 10-year Japanese government bond yields as well, after having tested the BOJ’s limit at the end of last week <a target=“_blank“ href=“https://www.forexlive.com/news/boj-being-tested-once-again-20230106/amp/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>Going back to USD/JPY, here is a look at the near-term chart:</p><p style=““ class=“text-align-justify“>Sellers managed to seize near-term control on a break below the 100-hour moving average (red line) in early trading today but buyers have turned it around to switch the near-term bias to being more bullish again in European trading. That comes after a break back above both the 100 and 200-hour (blue line) moving averages.</p><p style=““ class=“text-align-justify“>The state of flux in the near-term control highlights that price action is still rather unsettled and that is arguably exemplified by the consolidation between 130.00 and 134.50 (you can even call it 135.00) for the time being.</p><p style=““ class=“text-align-justify“>As the pair continues to toss and turn, eventually we’ll see it fall off on one side and that will make for a good trending move to catch. And we might not have to wait too long for a trigger with the US CPI data coming up on Thursday.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Prior 6.5%</li></ul><p style=““ class=“text-align-justify“>Euro area unemployment keeps steady in November, suggesting that labour market conditions are still fairly solid despite rising risks of a recession.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Prior -21.0</li></ul><p style=““ class=“text-align-justify“>Euro area investor morale rises for a third straight month, moving to its highest level since June last year. That said, the negative reading continues to reflect a rather challenging and poor economic outlook for the most part. Sentix notes that:</p><p style=““ class=“text-align-justify“>“January data indicates a further improvement but there is virtually no change in the assessment of the current situation, with only the expectations values signalling a greater easing of the situation.“</p>

This article was written by Justin Low at www.forexlive.com.